Selling: 80/20 Rule – Where Does Your Company Stack Up

What’s the sales environment in your company? Do you follow the 80/20 rule in which 80% of your revenue comes from just 20% of your accounts? Does this make you nervous? (It should!)

Many companies that follow this rule encounter very real business risks. Without addressing those risks and taking steps to prevent the fallout, those companies will land themselves in a problematic sales situation.

Here’s why:

When you derive such a significant percentage of your revenue from just a small percentage of your clients, you will find yourself in perilous circumstances should you lose one of those key accounts. The ramifications of this loss may include layoffs, budgetary decreases, and other cost-cutting measures. When the revenue is spread across a larger base of clients, you can more easily absorb the upset of a lost piece of business.

By not paying attention to smaller accounts and instead focusing on the accounts where most of the revenue is generated, you are probably leaving business on the table. With a bit more effort and involvement you may be able to grow these marginal accounts and turn them into business that is more robust and profitable.

Although it may seem counterintuitive, your sales representatives can get complacent when tasked with “servicing” the largest accounts. They may lose their sales competencies, motivation, and enthusiasm to bring in new business, thereby turning into highly compensated Account Managers and, in some extreme cases, Order-Takers.

Here are suggestions that can help you avoid the negative impact of the 80/20 rule:

Establish a sales outreach program that targets your smaller accounts with the goal of untapping their sales potential. Create a long-term action plan to grow the business so that it is not “one and done” account management but rather an ongoing part of your outreach. This program will also help you to “clean your list” and resign accounts that have no additional sales potential and are no longer profitable.

Develop an incentive program to reward sales representatives when they increase sales revenues from smaller accounts, thereby demonstrating a commitment to building their book of sales. They will feel appropriately compensated and that there is “something in it for them” if they pay attention to these clients.

Quantify everything before it is too late. Many Business Owners find themselves losing their smaller accounts only to find out that these seemingly insignificant pieces of business were actually much larger if only the sales staff had thoroughly worked the account.

Consider establishing a separate inside sales department to better retain, service, and grow marginal accounts. Once these accounts are grown they can then be turned over to your outside sales representatives and in some situations may even be retained by the inside team if a strong relationship and bond has formed.

As we inch closer to the end of the year, now is an excellent time to do a thorough assessment of your account base to determine if you have some gold that needs to be mined. It’s never too late to get started on growing your existing business!